Shared musings by Wayne Abernathy on how the eternal things make all things new. A brief consideration. . .

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History does not repeat itself, not precisely. Humans, though, have been doing similar things for thousands of years. History offers patterns from which we can learn. That is to say, that there is nothing new that is wholly new.

There is too much for comfort in the current international situation—and the U.S. response to it—that feels like the 1930s. The republics of the West, focused inward, struggle with economic traumas and work hard to make them worse in the name of making things better. National leaders even when aware of storm clouds on the global horizons ignore them if they can, and minimize the dangers if they cannot, applying symbolic but ineffective remedies where action is unavoidable. Aggressive second rate powers strive for recognition as though first rate powers, conspiring to disrupt the international equilibrium and the peace that rests on it to get what they want. While potential enemies rapidly rearm, the West disarms in the name of peace, heedless of the wars and conflicts that fill the vacuums of their military retreats. Again, I am talking about today, not the 1930s, but the parallels are disquieting.

The United States has gotten into unwanted conflicts, especially in the 20th Century, when adversaries miscalculated our nation’s willingness to sacrifice to defend crucial interests. Weak-kneed, pusillanimous, or just unwise national executives invited war by giving enemies many reasons to doubt our will and resolve: unprepared armed forces, verbal warnings enforced with bluster, shirked fulfillment of pledges to help endangered friends. The Japanese thought that isolationist and poorly armed America would seek a negotiated settlement after Pearl Harbor, the North Koreans were confident that we were too war-weary to defend the South, Saddam Hussein—twice—believed that we would not want to fight a war in the sands of Iraq. Our responses to frequent goading did little to dissuade them. Logically following our miscues they each went too far at last. They all could have been stopped by a determined show of strength early while war remained avoidable, when we could have corrected their calculations at lesser cost to us and to them.

The communist leaders of China are by nature cautious. You survive the palace intrigues of the Forbidden City by avoiding mistakes, not by making them. But the Chinese leaders also have big plans, increasingly marked on a global map. The leaders of the regime in power are the heirs of their founder, Mao, who liked to refer to the United States as a paper tiger. For a time Nixon and Reagan disabused them of that notion, but they seem to be reconvincing themselves of Mao’s insights. Where is the recent evidence to the contrary?

At first, Chinese forays were camouflaged by equipping and supporting the adventures of the proxy North Koreans. Lately, the Chinese military itself has repeatedly hacked into U.S. civilian and military computer systems, with efforts ranging from nuisances to theft of military and technology secrets. The rapidly expanding Chinese navy is now building aircraft carriers, though it has no overseas enemies. In a related effort, the Chinese are dredging up artificial islands in the South China Sea, a thousand miles from their shores, closer to the Philippines, Malaysia, and Vietnam than to the southern coast of China. With naval stations and air strips on the islands, the Chinese are asserting a dramatic expansion of territorial waters measured from these militarized sandbars. Connecting the dots from new island to new island (there are some half dozen or more of these land-creation projects underway), the Chinese navy alleges control of sea lanes and airspace, demanding that planes or ships not pass their theoretical net without Beijing’s permission. The U.S. has made protests, recently backed up by a reconnaissance plane flying across what has been international waters and free airspace since before and after World War II. At least for the moment the Chinese only fired words, eight times (according to a CNN story) warning the U.S. plane to stay away. “This is the Chinese navy. You go.”

This is a minor disturbance in a major geopolitical struggle. Busy trade lanes cross the South China Sea. In the context of Beijing’s acquisition of an offensive, MIRVed nuclear missile arsenal now approaching the size of Russian and U.S. nuclear forces (the U.S. being the only one developing plans to reduce its stockpile), the risks are becoming very high.

China has big domestic problems. The economy is slowing, if not already in recession. That will make it even harder for Beijing to keep quiescent a population only half of which has experienced extraction from grinding communist poverty. An aging population will be difficult for the declining workforce to support in coming years. And then there is the legacy of China’s one-child policy, more than 100 million males with no possibility of marriage and family. What to do with those restless men?

Throughout history, China’s biggest dangers have usually been from Chinese, vulnerabilities from the outside attracted only when there was weakness caused by internal struggles. Might the heirs of Mao seek to distract internal discontent with international adventurism? A lesson from history is that the more autocratic the regime, the more likely it is to resort to this gambit.

We need a foreign policy that convinces the Chinese leaders how dangerous and unrewarding such moves would be. That becomes harder to do the more we allow the Chinese to fool themselves that it might be otherwise. That was a pattern of disaster for Tojo, Hitler, and others—and for us.

Speaking of banks, as I did on this page a short time ago, there are those who are concerned that too many people in the United States are “unbanked” or “underbanked.” By the former they seem to mean those who do not use any banking services, particularly who do not have any bank accounts. By the former, they mean those who obtain some banking services from businesses that are not banks. The very existence of the terms, and the way that they are used by those who use them, implies that being “unbanked” or “underbanked” is a bad thing.

I will here disclose that I have worked for banks for nearly 10 years and for all I know may continue to do so for some time into the future. Whatever bias or color to my views that this condition provides I will nevertheless try to comment from a fair and factual point of view.

My first point, therefore, is that I am not prepared to assert that absolutely everyone should have a bank account. I can easily envision the value of a bank account for most if not all people, but I concede that they should be allowed to choose for themselves and that it would be terribly wrong to force people into banks. I acknowledge that there are some alternative providers of financial services who seem to please their customers, and I do not deny that banks can benefit from good competition. Banks have a long history of drawing upon the ideas and innovations of non-banks, just as non-banks have been eager to try their hand at successful new products and services that banks have pioneered. Bank customers have benefited the most from that process, as the variety and value of financial products have expanded, and the United States has led the world in the discovery of new and useful financial services.

Having said that, the nation cannot do well without a strong, vibrant, and prosperous banking industry. Our nation and people grow as we save financial resources and invest them in improvements for the future, whether new homes, new factories, or new ideas of how to do and make things better, faster, and cheaper. That is a major part of what banks do and are all about.

Moreover, there are a lot of things we do and a lot of places we go because we know that our ability to pay and get paid—to exchange things we value less for things that we value more (the reason we buy and sell things and use money to do it)—is secure, reliable, accurate, and relatively quick. That is our payments system, and banks created it and are at the center of it.

Americans also like the idea of becoming wealthier and expect to do so. If that seems a commonplace to you, recognize that it is not so in all parts of the world, where getting by from day to day is about the most to which people can aspire, for whom poverty is a way of life that they expect to bequeath to their children. To the extent that this miserable condition is becoming less the case in much of the world, that more people are beginning to believe that they can build and improve their wellbeing for themselves and their posterity, this new-found hope for accumulating wealth is attributable to the dispersion of principles of freedom and prosperity that Americans take for granted but which are new to much of the world. The global adoption of many American principles of prosperity has been a major contribution of the New World to the Old World and to all mankind.

Now get ready for the bold but true statement: you cannot get there and stay there without banks and the services that banks provide. Banks gather wealth, safeguard wealth, allow it to be used efficiently, and apply it to building the future. That is why governments pay so much attention to banks, and also why it is so harmful when governments try to capture banks and channel their services to the personal gain of themselves and their cronies. That is also why misguided bank regulations are harmful—even if in subtle but powerful ways—to the nation and its people.

Which brings us back to the agenda of the “unbanked” and the “underbanked.” In the United States, chief causes for people remaining “unbanked” are regulations that make banking more difficult and services more expensive; cultural barriers for people who come from societies where personal banking is either unknown or where the experience has been one of banks used by local governments to harvest wealth from people to enrich the governing elites and their cronies (much of Latin America, for example); and people who for whatever reason just do not prefer to use banks. The first cause regulators can solve but have largely been resistant to solving; the second can be overcome by time and experience and is showing signs of that; and the third cause is no more of a problem than people who prefer to rent rather than own their home, to eat eggs without grits, or who do not like the New York Yankees. I do not have to understand the personal preference to acknowledge it.

The concept of “underbanked” (that government needs to help banks figure out how to serve people who may get some banking services outside of banks) I fear may be a political device to harness American banks to serve the cronies of the “underbanked” advocates. We have already seen this game with the Community Reinvestment Act (CRA) regulations, adopted ostensibly to ensure that banks lend to their local communities (as if bankers, unlike other businessmen, need government regulation to notice business opportunities right under their own nose). In practice, CRA has been used to coerce banks into providing loans and even grants to and through poverty advocacy agencies that tend to prosper more than the people whom they claim to be helping. The folks who fret about the “underbanked” have marvelous formulas and plans for other people’s money to solve problems about which the people to be helped seem little concerned. I have never heard of any truly “underbanked” people themselves calling for the firm hand of government to get them into the banking system; if they want banking services, they just go and get them.

I have the haunting suspicion that the “underbanked” advocates would if they could use banks the same way found in the abandoned societies of the “unbanked,” where banking services came through the hands of people who knew better than others and always made sure to get their cut for their benevolence. That is not really banking, and that is symptomatic of why people flee those lands. The wealth creation of such captive banks seems to be for someone else. If it happens in America, where will the people go?

These thoughts, first published almost a year and a half ago, still seem pertinent today.

Notice how frequently these days when discussing the state of the American union, or any parts thereof, people rely upon the word “still.” That is a bad sign. When someone says, “I am still able to see my own doctor,” he or she implies that continued access is in doubt. Rather than reassuring, it insinuates caution and reveals anxiety. What do you hear when someone says, “At least I am still married”?

You do not commonly hear people using “still” in connection with things that they are sure of. If a baseball player boasts, “I can still hit the ball out of the park,” is he likely to be in his prime or in the twilight of his career?

Allow me to offer for your consideration a dozen recent objects of STILL in public discourse about the condition of the nation:

The United States is still the largest economy in the world.

The United States still has the strongest/best military in the world.

The dollar is still the world’s reserve currency.

The United States still is a free country.

America still is the land of opportunity.

The Supreme Court still can be counted on to defend the Constitution.

By hard work and best effort you still can become anything you want.

My children will still have a better life than I have had.

My children will still live in a bigger house than the one I grew up in.

In this country you can still get the best healthcare.

America still has the deepest, most liquid, and efficient financial markets.

At least the air you breathe is still free.

Undoubtedly, you can think of more for the list. Then, there are some things we do not hear people saying “still” about any more:

America is the best place to get an education.

Americans make the best cars.

I can freely speak my mind.

I can trust what I hear or read in the “news.”

You can count on the elections not being rigged.

I forbear going on. You can add more if you wish. There are some topics where the doubt is too palpable for people to venture “still” in their expressions.

If we leave the discussion at that, then we have a sad commentary on the sad state of the union. The expression of “still” in our conversation can reveal a desperate clinging to the past with a forlorn wish that things will work out for the future, without doing the good works to make the good future happen.

I would suggest, though, that “still” can also mean “not over,” or “not gone.” We need not settle for “still” and do nothing about it. That which we value can be reclaimed from assault and reinforced, the erosion stopped, the tide turned. After all, John Paul Jones is famous for winning a naval battle from the deck of his sinking—but still afloat—flagship, because he used it as a platform from which to regain what was lost. “I have not yet begun to fight!” is still part of the American heritage.

Worth Repeating

“Earned success means the ability to create value honestly—not by winning the lottery, not by inheriting a fortune, not by picking up a welfare check. It doesn’t even mean making money itself. Earned success is the creation of value in our lives or in the lives of others. Earned success is the stuff of entrepreneurs who seek explosive value through innovation, hard work, and passion.”
(Arthur C. Brooks, The Battle, p.75)

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